Lease sets rental terms for Phantoms

Brooks brothers

MONICA CABRERA, TMC

FILE: (left to right) Brothers Robert and Jim Brooks discuss their purchase of the American Hockey League's Phantoms on Thursday February 12, 2009. The Brooks Group had rental terms for the minor league hockey team set on Wednesday, estimating the total cost of the downtown arena at $157.9 million.

FILE: (left to right) Brothers Robert and Jim Brooks discuss their purchase of the American Hockey League's Phantoms on Thursday February 12, 2009. The Brooks Group had rental terms for the minor league hockey team set on Wednesday, estimating the total cost of the downtown arena at $157.9 million. (MONICA CABRERA, TMC)

Scott Kraus, Of The Morning Call

The owners of Allentown's future minor league hockey team will make $6.7 million in rent payments over 29 years, cover up to $500,000 a year in capital improvements and make annual payments starting at $100,000 for the right to play hockey in and operate the city's new arena.

In exchange, The Brooks Group will get 100 percent of the revenue from ticket proceeds, on-site parking, concessions, food and beverage sales, arena naming rights and advertising, according to a 117-page lease made public Wednesday.

The team owners will cover utilities, routine maintenance and other operating costs such as snow removal at the new facility, planned for the 700-800 block of Hamilton Street.

The lease estimates the total cost of the downtown arena — which will be built to hold 8,500 spectators for hockey and up to 10,000 for concerts — at $157.9 million. City officials previously put the price at "more than $100 million."

The Brooks Group will also be responsible for an $8 million capital contribution (some or all of which can be covered with federal New Market Tax Credits if they can be secured from the U.S. Treasury). The city estimated the team owners' total investment in the project over the term of the deal at $33.5 million.

The rent payments are front-loaded, starting at $900,000 a year in years one through five, but phasing out so that in years 11-29, Brooks will owe the city's arena authority $1 a month. The payments will go to the Allentown Commercial and Industrial Development Authority or a new city authority created to run the facility.

The deal commits the city to making a list of traffic improvements recommended by consultants, including updated downtown traffic signal timing and parking signs directing motorists heading to events at the arena of parking locations and available spots.

Brooks Group co-owner Jim Brooks said he is pleased that the lease, which is subject to approval by the American Hockey League board of governors, has been completed. The Phantoms are a Philadelphia Flyers affiliate that plays in the AHL.

"Now, I think it helps become more real for people not as close to it as us," he said. "I think we will see more and more jobs and development come to downtown because they are anticipating this and it is more real for them now."

The arena project is expected to go before the Allentown Planning Commission next month; demolition work has begun.

In a press release, city officials said they looked forward to working with the Brooks Group on additional tenants for the arena, such as arena football, professional lacrosse and independent pro basketball. The city expects the arena will be in use 120 days a year and to draw 400,000-plus visitors to downtown Allentown.

Mayor Ed Pawlowski said the lease signing is just one element in the city's revitalization efforts.

"Several other private investments have already been made in downtown and jobs added since this project has begun," Pawlowski said in a statement. "I believe we are merely seeing the tip of the iceberg as it relates to investment and jobs coming to downtown Allentown."

The arena, to be owned and financed by a newly created city authority, will be built in a 130-acre Neighborhood Improvement Zone. All state and local taxes (excluding property taxes) collected in the zone will be set aside to cover the cost of arena construction and used to help finance spinoff development such as office and retail.

The Allentown Commercial and Industrial Development Authority made the lease public Wednesday after The Morning Call made a request last week under the state's open records act. The lease was signed Dec. 9, but the authority did not receive the final copy until the middle of last week.

Some other provisions:

•The lease gives the city the right to use the arena five days a year for community events, rent-free, provided the city covers costs such as setup and security.

•The $100,000-a-year annual payment from the Brooks Group would pay for city services such as traffic control, infrastructure improvements, lighting and signage costs and will increase by 5 percent every two years.

•The city and arena authority will share a luxury box including tickets to all American Hockey League events. The city or authority must pay for food and beverages consumed in the box.

•The lease would create "community development guidelines" designed to promote workforce development and training and local hiring in connection with arena construction and operation.

•Any construction cost overruns would be split by ACIDA and the Brooks Group.

The agreement also gives Brooks the right to develop and operate a convention center that may be built nearby after the arena is operational, provided the company invests $10 million of its own capital. It also gives the Brooks Group the ability to develop a nearby by "anchor attraction," such as a cinema or youth sports complex, designed to complement the arena and draw additional visitors downtown.

"What we are focused on is creating a business model that will work for a long time but will be something the community is very proud of," Brooks said. "That is exactly what these facilities are."

Brooks Group can renew the arena lease for two 10-year periods after its expiration. Or Brooks Group could purchase the arena after 29 years for its fair market value, minus the cost of all capital improvements or a price calculated using two alternative methods, whichever is greater.

Inclusion of the purchase option provision appears to allow ACIDA to avoid the use of public bidding when awarding construction contracts for the arena, according to the state law that governs industrial development authorities.